Question for the Board about public finance ...

KnightWhoSaysNit

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Jul 19, 2010
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I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.
 

junior1

Well-Known Member
May 29, 2001
6,711
7,384
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I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.
you have asked questions that lots of folks have been speaking of on this board, maybe not as succinctly.

Yea you're right, some economists have said exactly what you did about interest rates, and some go further and highlight that we may need to get to 6% unemployment for a considerable period in order to get inflation under control. Of course, the fed believes it can bring inflation to 2% target without putting us in recession. Good Luck with that. The housing industry, which usually leads into and out of recessions, is already in the dumps and the mortgage rate just crossed 6% yesterday. So if anything, housing market will deteriorate even further.
It's really kind of interesting that the economy itself has not been so bad, yet the fed is doing all it can to bring it down.
Insofar as the debt...I don't know how old you are, but if you were following the debt crisis back in the late 80s early 90s, you might remember Graham-Rudman and the calls to decrease the deficit when it was under $5trillion. Now here we are at $31 trillion and the outyear budgets all carry projected $1 trillion deficits. Now I'm sure our liberal friends will have different solutions, there are normally two parts to these economic dilemmas, increase revenues or/and decrease outlays. Back in the day, there was a tax surcharge on the wealthy that went to debt reduction. You might have noticed that even sen warrens calls for surcharges, she includes plans to spend that money on child care, education, healthcare etc......not for debt reduction. In the most recent forgiveness of student loans, the "payfor" came from projected decreases in federal deficits not from any real money. So we're paying for student debt with money that we didin't have anyway...governmnet financial logic.
There is no serious proposal that I have seen for reducing the debt, or the annual deficits. Our leaders seem to be ok with a $31 trillion and increasing national debt.
If this was a dreaded "corporation" the government would be all over it for financial mismanagement. But, if we listen to our current leadership in DC, all is well.
 
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KnightWhoSaysNit

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Jul 19, 2010
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you have asked questions that lots of folks have been speaking of on this board, maybe not as succinctly.

Yea you're right, some economists have said exactly what you did about interest rates, and some go further and highlight that we may need to get to 6% unemployment for a considerable period in order to get inflation under control. Of course, the fed believes it can bring inflation to 2% target without putting us in recession. Good Luck with that. The housing industry, which usually leads into and out of recessions, is already in the dumps and the mortgage rate just crossed 6% yesterday. So if anything, housing market will deteriorate even further.
It's really kind of interesting that the economy itself has not been so bad, yet the fed is doing all it can to bring it down.
Insofar as the debt...I don't know how old you are, but if you were following the debt crisis back in the late 80s early 90s, you might remember Graham-Rudman and the calls to decrease the deficit when it was under $5trillion. Now here we are at $31 trillion and the outyear budgets all carry projected $1 trillion deficits. Now I'm sure our liberal friends will have different solutions, there are normally two parts to these economic dilemmas, increase revenues or/and decrease outlays. Back in the day, there was a tax surcharge on the wealthy that went to debt reduction. You might have noticed that even sen warrens calls for surcharges, she includes plans to spend that money on child care, education, healthcare etc......not for debt reduction. In the most recent forgiveness of student loans, the "payfor" came from projected decreases in federal deficits not from any real money. So we're paying for student debt with money that we didin't have anyway...governmnet financial logic.
There is no serious proposal that I have seen for reducing the debt, or the annual deficits. Our leaders seem to be ok with a $31 trillion and increasing national debt.
If this was a dreaded "corporation" the government would be all over it for financial mismanagement. But, if we listen to our current leadership in DC, all is well.

And the real thing that sustains this illusion for American citizens is that we have a reserve currency. In other words, we print money and people around the world give us stuff for it. Americans are accustomed to this. We don't need to manufacture they say. We have enough. We can be a "service economy," i.e., cut each other's hair. We actually have money, they say, for infrastructure, without cutting anything else.

Eventually the world will realize that American citizens won't pay back their debt. That will increase interest rates, crash the dollar, and create hyperinflation in the USA. That has to be China's goal.

Dems can't think this through. They think we are in balance right now, or their behavior states this. In other words, any revenue to decrease deficits goes right into some new spending program. It never ends.

The bottom line is that Dems do not have a proposal that sustains or increases living standards -- private sector growth. You have to have real economic growth for that, not nominal growth.

It's unbelievable, the ignorance.
 
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bdgan

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May 29, 2008
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I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.
$30 trillion debt at 3% interest = $900 billion. Tax revenues are more than $4 trillion so it's going to a while until interest expense is more than tax revenue.

Spending won't drop. Budgeted spending for this year is $5.8 trillion and Biden just added $4 trillion over 10 years which averages $400b. Politicians aren't going to cut entitlements and they can't cut interest on the debt.

Revenues are about $4.4 trillion but that's when the economy is good. That could easily drop a few hundred $billion during an economic downturn. IMO you're looking at $2 trillion deficits going forward.

The prime rate is already 5.5%. The Fed rate is "only" 2.5% but it could be 4% before year end. IMO that could be enough to slow the economy dramatically. I don't think rates have to go above the rate of inflation to have a major effect. I wouldn't be surprised to see inflation to drop 4% as the economy slows, then see the fed start cutting rates to slow the economic damage. I don't see a way to have 2% inflation and strong economic growth given all the deficit spending.
 

rumble_lion

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Aug 7, 2011
23,133
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I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself.

The federal government doesn't "finance" anything. when Congress votes a spending bill into law the dollars are simply created and spent by adjusting the dollar amounts in bank accounts. If the federal government spends more in year than it receives in taxes it issues treasuries for that amount. The treasuries simply shift dollar amounts from "checking" to "savings" accounts at the fed that pay interest. When the interest is paid or the treasury bill matures the dollars are simply shifted from the "tbill" account back to the "checking" account.
 
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rumble_lion

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Aug 7, 2011
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you have asked questions that lots of folks have been speaking of on this board, maybe not as succinctly.

Yea you're right, some economists have said exactly what you did about interest rates, and some go further and highlight that we may need to get to 6% unemployment for a considerable period in order to get inflation under control. Of course, the fed believes it can bring inflation to 2% target without putting us in recession. Good Luck with that. The housing industry, which usually leads into and out of recessions, is already in the dumps and the mortgage rate just crossed 6% yesterday. So if anything, housing market will deteriorate even further.
It's really kind of interesting that the economy itself has not been so bad, yet the fed is doing all it can to bring it down.
Insofar as the debt...I don't know how old you are, but if you were following the debt crisis back in the late 80s early 90s, you might remember Graham-Rudman and the calls to decrease the deficit when it was under $5trillion. Now here we are at $31 trillion and the outyear budgets all carry projected $1 trillion deficits. Now I'm sure our liberal friends will have different solutions, there are normally two parts to these economic dilemmas, increase revenues or/and decrease outlays. Back in the day, there was a tax surcharge on the wealthy that went to debt reduction. You might have noticed that even sen warrens calls for surcharges, she includes plans to spend that money on child care, education, healthcare etc......not for debt reduction. In the most recent forgiveness of student loans, the "payfor" came from projected decreases in federal deficits not from any real money. So we're paying for student debt with money that we didin't have anyway...governmnet financial logic.
There is no serious proposal that I have seen for reducing the debt, or the annual deficits. Our leaders seem to be ok with a $31 trillion and increasing national debt.
If this was a dreaded "corporation" the government would be all over it for financial mismanagement. But, if we listen to our current leadership in DC, all is well.

There is no serious proposal that I have seen for reducing the debt, or the annual deficits. Our leaders seem to be ok with a $31 trillion and increasing national debt.

You could try opening your eyes maybe?

WASHINGTON, May 25 (Reuters) - The U.S. budget deficit will shrink dramatically to $1.036 trillion for fiscal 2022 from $2.775 trillion last year as a strong recovery prompts a surge in revenues and lower outlays, but slowing growth will start to reverse the trend, the Congressional Budget Office said on Wednesday.​
Releasing new economic and baseline budget forecasts, the CBO said its now expects the fiscal 2022 deficit to be $118 billion lower than an estimate made last July. The government's fiscal year starts Oct. 1 and runs through Sept. 30.​
 

rumble_lion

Well-Known Member
Aug 7, 2011
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And the real thing that sustains this illusion for American citizens is that we have a reserve currency. In other words, we print money and people around the world give us stuff for it. Americans are accustomed to this. We don't need to manufacture they say. We have enough. We can be a "service economy," i.e., cut each other's hair. We actually have money, they say, for infrastructure, without cutting anything else.

Eventually the world will realize that American citizens won't pay back their debt. That will increase interest rates, crash the dollar, and create hyperinflation in the USA. That has to be China's goal.

Dems can't think this through. They think we are in balance right now, or their behavior states this. In other words, any revenue to decrease deficits goes right into some new spending program. It never ends.

The bottom line is that Dems do not have a proposal that sustains or increases living standards -- private sector growth. You have to have real economic growth for that, not nominal growth.

It's unbelievable, the ignorance.

In other words, we print money and people around the world give us stuff for it.

More accurately people around the world want to save US dollars. There are lots of reasons for that - it's a very stable currency, there is a lot stuff you purchase with it, treasuries are risk free way of saving dollars while earning interest, the treasury market is extremely liquid, etc., etc.

Americans are accustomed to this. We don't need to manufacture they say. We have enough. We can be a "service economy," i.e., cut each other's hair.

Hmmm haircuts did not make the list of top ten exports for 2021.

Export growth rebounds. U.S. exports of goods and services rose over 18.5% in 2021, largely making up for the pandemic-induced 15.6% decrease in 2020. Goods exports increased by 23.3%. International Trade Administration economists note the U.S. set export records with 57 trading partners, including big markets such as Mexico, China, South Korea, and Germany.​
The following export product groups categorize the highest dollar value in American global shipments during 2021. Also shown is the percentage share each export category represents in terms of overall exports from the United States.​
  1. Mineral fuels including oil: US$239.8 billion (13.7% of total exports)
  2. Machinery including computers: $209.3 billion (11.9%)
  3. Electrical machinery, equipment: $185.4 billion (10.6%)
  4. Vehicles: $122.2 billion (7%)
  5. Optical, technical, medical apparatus: $91.7 billion (5.2%)
  6. Aircraft, spacecraft: $89.1 billion (5.1%)
  7. Gems, precious metals: $82.3 billion (4.7%)
  8. Pharmaceuticals: $78 billion (4.4%)
  9. Plastics, plastic articles: $74.3 billion (4.2%)
  10. Organic chemicals: $42.9 billion (2.4%)
Eventually the world will realize that American citizens won't pay back their debt.

When have we not paid back our debt? We always pay our debt and interest that's why US Treasuries are considered risk free investments. It not possible for the US federal government to forced into default for debt denominated in US dollars.

That will increase interest rates, crash the dollar, and create hyperinflation in the USA. That has to be China's goal.

The Chinese want to kill the economy of their biggest customer? Where would they sell all the crap they make?

It's unbelievable, the ignorance.

I can agree with you on this 100%.
 

LionDeNittany

Well-Known Member
May 29, 2001
46,477
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1
DFW, TX
I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.

Prime to 5% is a done deal.

Also you should ignore Rumble. He's a fool
 
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rumble_lion

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Aug 7, 2011
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$30 trillion debt at 3% interest = $900 billion. Tax revenues are more than $4 trillion so it's going to a while until interest expense is more than tax revenue.

Spending won't drop. Budgeted spending for this year is $5.8 trillion and Biden just added $4 trillion over 10 years which averages $400b. Politicians aren't going to cut entitlements and they can't cut interest on the debt.

Revenues are about $4.4 trillion but that's when the economy is good. That could easily drop a few hundred $billion during an economic downturn. IMO you're looking at $2 trillion deficits going forward.

The prime rate is already 5.5%. The Fed rate is "only" 2.5% but it could be 4% before year end. IMO that could be enough to slow the economy dramatically. I don't think rates have to go above the rate of inflation to have a major effect. I wouldn't be surprised to see inflation to drop 4% as the economy slows, then see the fed start cutting rates to slow the economic damage. I don't see a way to have 2% inflation and strong economic growth given all the deficit spending.

Spending won't drop. Budgeted spending for this year is $5.8 trillion and Biden just added $4 trillion over 10 years which averages $400b. Politicians aren't going to cut entitlements and they can't cut interest on the debt.

WASHINGTON, May 25 (Reuters) - The U.S. budget deficit will shrink dramatically to $1.036 trillion for fiscal 2022 from $2.775 trillion last year as a strong recovery prompts a surge in revenues and lower outlays, but slowing growth will start to reverse the trend, the Congressional Budget Office said on Wednesday.​
 

junior1

Well-Known Member
May 29, 2001
6,711
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There is no serious proposal that I have seen for reducing the debt, or the annual deficits. Our leaders seem to be ok with a $31 trillion and increasing national debt.

You could try opening your eyes maybe?

WASHINGTON, May 25 (Reuters) - The U.S. budget deficit will shrink dramatically to $1.036 trillion for fiscal 2022 from $2.775 trillion last year as a strong recovery prompts a surge in revenues and lower outlays, but slowing growth will start to reverse the trend, the Congressional Budget Office said on Wednesday.​
Releasing new economic and baseline budget forecasts, the CBO said its now expects the fiscal 2022 deficit to be $118 billion lower than an estimate made last July. The government's fiscal year starts Oct. 1 and runs through Sept. 30.​
you're kidding right. In my post I said that deficits are projected at $1 trillion as far as the eye can see. So, the deficit came down from 2.7 to 1.0....anything happen in 2022 that was outside the normal budget process that caused the deficit to balloon to 2.75? So the debt goes up by $1trillion....isn't that what I wrote?
The CBO expects the deficit to be lower than anticipated in july. So what was the deficit in July? Didn't biden just forgive student debt and pay for it with the "savings" from reducing the deficit?
I say again, there is no serious proposal for reducing the deficits or the debt. If you think that cutting 10% from a $1trillion annual deficit that adds $900b to the debt is serious, then you're part of the problem
Maybe it's you who need to open his eyes
 
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KnightWhoSaysNit

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Jul 19, 2010
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How does the government finance this? It seems to me that interest payments will exceed the deficit itself.

The federal government doesn't "finance" anything. when Congress votes a spending bill into law the dollars are simply created and spent by adjusting the dollar amounts in bank accounts. If the federal government spends more in year than it receives in taxes it issues treasuries for that amount. The treasuries simply shift dollar amounts from "checking" to "savings" accounts at the fed that pay interest. When the interest is paid or the treasury bill matures the dollars are simply shifted from the "tbill" account back to the "checking" account.

For goodness sakes, we're having a discussion here about inflation, which happens when things are not properly financed.

In broad terms, assuming constant flow of dollars out of the country and constant production, what the government doesn't tax it "prints". When it prints too much relative to production we have inflation as too much money hits too few goods.

You can get bogged down in how transactions occur but that isn't the problem. It's about spending past the limits of your checking account (the production of the private sector economy).

Unless you are living under a rock you would understand that this is the problem faced by the Fed today.
 

KnightWhoSaysNit

Well-Known Member
Jul 19, 2010
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$30 trillion debt at 3% interest = $900 billion. Tax revenues are more than $4 trillion so it's going to a while until interest expense is more than tax revenue.

Spending won't drop. Budgeted spending for this year is $5.8 trillion and Biden just added $4 trillion over 10 years which averages $400b. Politicians aren't going to cut entitlements and they can't cut interest on the debt.

Revenues are about $4.4 trillion but that's when the economy is good. That could easily drop a few hundred $billion during an economic downturn. IMO you're looking at $2 trillion deficits going forward.

The prime rate is already 5.5%. The Fed rate is "only" 2.5% but it could be 4% before year end. IMO that could be enough to slow the economy dramatically. I don't think rates have to go above the rate of inflation to have a major effect. I wouldn't be surprised to see inflation to drop 4% as the economy slows, then see the fed start cutting rates to slow the economic damage. I don't see a way to have 2% inflation and strong economic growth given all the deficit spending.

3% is a stretch with debt/GDP at 125%.
 
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Catch50

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Feb 5, 2003
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I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.
If you cut spending, then employment goes down and tax revenue goes down. The R's should have thought of that before Trump cut taxes.
 

Conemaugh

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May 8, 2020
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How does the government finance this? It seems to me that interest payments will exceed the deficit itself.

The federal government doesn't "finance" anything. when Congress votes a spending bill into law the dollars are simply created and spent by adjusting the dollar amounts in bank accounts. If the federal government spends more in year than it receives in taxes it issues treasuries for that amount. The treasuries simply shift dollar amounts from "checking" to "savings" accounts at the fed that pay interest. When the interest is paid or the treasury bill matures the dollars are simply shifted from the "tbill" account back to the "checking" account.
Thank you rumble. Now please answer the question.
 

Catch50

Well-Known Member
Feb 5, 2003
36,260
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you have asked questions that lots of folks have been speaking of on this board, maybe not as succinctly.

Yea you're right, some economists have said exactly what you did about interest rates, and some go further and highlight that we may need to get to 6% unemployment for a considerable period in order to get inflation under control. Of course, the fed believes it can bring inflation to 2% target without putting us in recession. Good Luck with that. The housing industry, which usually leads into and out of recessions, is already in the dumps and the mortgage rate just crossed 6% yesterday. So if anything, housing market will deteriorate even further.
It's really kind of interesting that the economy itself has not been so bad, yet the fed is doing all it can to bring it down.
Insofar as the debt...I don't know how old you are, but if you were following the debt crisis back in the late 80s early 90s, you might remember Graham-Rudman and the calls to decrease the deficit when it was under $5trillion. Now here we are at $31 trillion and the outyear budgets all carry projected $1 trillion deficits. Now I'm sure our liberal friends will have different solutions, there are normally two parts to these economic dilemmas, increase revenues or/and decrease outlays. Back in the day, there was a tax surcharge on the wealthy that went to debt reduction. You might have noticed that even sen warrens calls for surcharges, she includes plans to spend that money on child care, education, healthcare etc......not for debt reduction. In the most recent forgiveness of student loans, the "payfor" came from projected decreases in federal deficits not from any real money. So we're paying for student debt with money that we didin't have anyway...governmnet financial logic.
There is no serious proposal that I have seen for reducing the debt, or the annual deficits. Our leaders seem to be ok with a $31 trillion and increasing national debt.
If this was a dreaded "corporation" the government would be all over it for financial mismanagement. But, if we listen to our current leadership in DC, all is well.
Tell us how to balance the budget. Do you know where to find the needed data?
 

The Spin Meister

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Nov 27, 2012
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An altered state
$30 trillion debt at 3% interest = $900 billion. Tax revenues are more than $4 trillion so it's going to a while until interest expense is more than tax revenue.

Spending won't drop. Budgeted spending for this year is $5.8 trillion and Biden just added $4 trillion over 10 years which averages $400b. Politicians aren't going to cut entitlements and they can't cut interest on the debt.

Revenues are about $4.4 trillion but that's when the economy is good. That could easily drop a few hundred $billion during an economic downturn. IMO you're looking at $2 trillion deficits going forward.

The prime rate is already 5.5%. The Fed rate is "only" 2.5% but it could be 4% before year end. IMO that could be enough to slow the economy dramatically. I don't think rates have to go above the rate of inflation to have a major effect. I wouldn't be surprised to see inflation to drop 4% as the economy slows, then see the fed start cutting rates to slow the economic damage. I don't see a way to have 2% inflation and strong economic growth given all the deficit spending.
The biggest problem is that half of that debt comes due in the next three years. Just as inflation and the Fed are raising rates already. And all that refinancing will,push rates higher yet. Then the annual paymencould approach manual tax revenue.
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
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you're kidding right. In my post I said that deficits are projected at $1 trillion as far as the eye can see. So, the deficit came down from 2.7 to 1.0....anything happen in 2022 that was outside the normal budget process that caused the deficit to balloon to 2.75? So the debt goes up by $1trillion....isn't that what I wrote?
The CBO expects the deficit to be lower than anticipated in july. So what was the deficit in July? Didn't biden just forgive student debt and pay for it with the "savings" from reducing the deficit?
I say again, there is no serious proposal for reducing the deficits or the debt. If you think that cutting 10% from a $1trillion annual deficit that adds $900b to the debt is serious, then you're part of the problem
Maybe it's you who need to open his eyes

the deficit came down from 2.7 to 1.0....anything happen in 2022 that was outside the normal budget

Do you believe reducing the deficit from 2.7 trillion in 2021 to 1 trillion in 2022 is inflationary or deflationary?
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
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Thank you rumble. Now please answer the question.

The government finances it exactly like it finances everything else it does. When Congress votes a spending bill into law it allows the treasury to add dollars to the banking system in an amount authorized by the spending bill.
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
5,647
1
The biggest problem is that half of that debt comes due in the next three years. Just as inflation and the Fed are raising rates already. And all that refinancing will,push rates higher yet. Then the annual paymencould approach manual tax revenue.

And all that refinancing will,push rates higher yet

No it won't. Rates are determined by the fed.
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
5,647
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For goodness sakes, we're having a discussion here about inflation, which happens when things are not properly financed.

In broad terms, assuming constant flow of dollars out of the country and constant production, what the government doesn't tax it "prints". When it prints too much relative to production we have inflation as too much money hits too few goods.

You can get bogged down in how transactions occur but that isn't the problem. It's about spending past the limits of your checking account (the production of the private sector economy).

Unless you are living under a rock you would understand that this is the problem faced by the Fed today.

For goodness sakes, we're having a discussion here about inflation, which happens when things are not properly financed.

It's pretty much the opposite. Financing is the biggest driver in the expansion of money.

In broad terms, assuming constant flow of dollars out of the country and constant production, what the government doesn't tax it "prints". When it prints too much relative to production we have inflation as too much money hits too few goods.

That is not the real world. All the factors vary. Our economy is growing every year just from population growth. A constant flow of dollars out of economy is deflationary as by definition that another way of describing savings. Most of the money in the economy is created by private banks when they create loans. Even the types of goods for sale in the economy changes and grows as time passes. There is lot more "stuff" you can buy in today's economy than there was for sale in the economy of 1950.​
 

junior1

Well-Known Member
May 29, 2001
6,711
7,384
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the deficit came down from 2.7 to 1.0....anything happen in 2022 that was outside the normal budget

Do you believe reducing the deficit from 2.7 trillion in 2021 to 1 trillion in 2022 is inflationary or deflationary?
i believe that the 2.7 trillion deficit was pandemic caused and/or caused by the unfunded 1.9 trillion infrastructure package...it - the 2.7 - was not caused by the normal presdent's budget to congress process - and therefore, while an accurate number, is an aberation to the normal budgeting process. It's kind of like Trump's admin and congress passes a 5 trillion anti pandemic bill.....it becomes part of the deficit...that's an accurate statement (I'm using 5 trillion only as an example). The next year, Biden spends only 1.9 trillion. So there's a 3 trillion deficit reduction. But the debt goes up by the same amount.
Do I believe inflationary or deflationary...I'm in the knight's camp too much money chasing too few goods. If we look back since clinton, every year we've had deficits...but we didn't have this level inflation. So, in and of itself deficit spending is not inflationary. So that then leads me back to the few too little goods. And the combination of too much money (deficits and fed easing) with the supply issues are whats causing inflation. When you look at the major components of the CPI, when oil prices were going to $120/barrel, we were at 9.1% inflation. Oil prices decline now we're at 8.3%. Quite a few "experts" predicted 8.0%. So what went wrong with the estimates? Well everything else went up, food, housing, medical, services.....so why did they go up? Well, just look at housing...mortgage rates up, housing shortage raises prices of houses, young starter households can't afford to buy, so the rent, shortage of rental properties leads to higher rents and on and on.
So now we add another variable, increased wages.....sure $15/hour is great, but with the same productivity the higher wage just adds to cost which in turn leads to inflation. Now I know democrats still believe that higher wages are just "eaten" by the employer, but historical evidence shows otherwise.
Worst part of this whole inflation exercise, in my opinion, is that it didn't need to be like this. Economists said that bidens first $1.9 trillion would lead to inflation and similarly urged the fed to start tightening back in 2021.
But, Powell wanted to be renominated and Biden wanted a political victory. Similarly, the war on fossil fuels didn't help..in fact, I believe, that if Biden eased back on his oil limits, we'd see an almost immediate economic pickup.
 
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Sullivan

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Nov 24, 2001
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the deficit came down from 2.7 to 1.0....anything happen in 2022 that was outside the normal budget

Do you believe reducing the deficit from 2.7 trillion in 2021 to 1 trillion in 2022 is inflationary or deflationary?

Yes, Biden’s deficits of $3.7 trillion over the past two years has caused a lot of inflation.
 

KnightWhoSaysNit

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Jul 19, 2010
9,240
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i believe that the 2.7 trillion deficit was pandemic caused and/or caused by the unfunded 1.9 trillion infrastructure package...it - the 2.7 - was not caused by the normal presdent's budget to congress process - and therefore, while an accurate number, is an aberation to the normal budgeting process. It's kind of like Trump's admin and congress passes a 5 trillion anti pandemic bill.....it becomes part of the deficit...that's an accurate statement (I'm using 5 trillion only as an example). The next year, Biden spends only 1.9 trillion. So there's a 3 trillion deficit reduction. But the debt goes up by the same amount.
Do I believe inflationary or deflationary...I'm in the knight's camp too much money chasing too few goods. If we look back since clinton, every year we've had deficits...but we didn't have this level inflation. So, in and of itself deficit spending is not inflationary. So that then leads me back to the few too little goods. And the combination of too much money (deficits and fed easing) with the supply issues are whats causing inflation. When you look at the major components of the CPI, when oil prices were going to $120/barrel, we were at 9.1% inflation. Oil prices decline now we're at 8.3%. Quite a few "experts" predicted 8.0%. So what went wrong with the estimates? Well everything else went up, food, housing, medical, services.....so why did they go up? Well, just look at housing...mortgage rates up, housing shortage raises prices of houses, young starter households can't afford to buy, so the rent, shortage of rental properties leads to higher rents and on and on.
So now we add another variable, increased wages.....sure $15/hour is great, but with the same productivity the higher wage just adds to cost which in turn leads to inflation. Now I know democrats still believe that higher wages are just "eaten" by the employer, but historical evidence shows otherwise.
Worst part of this whole inflation exercise, in my opinion, is that it didn't need to be like this. Economists said that bidens first $1.9 trillion would lead to inflation and similarly urged the fed to start tightening back in 2021.
But, Powell wanted to be renominated and Biden wanted a political victory. Similarly, the war on fossil fuels didn't help..in fact, I believe, that if Biden eased back on his oil limits, we'd see an almost immediate economic pickup.

Rumble is real good at taking an issue off on a tangent and confusing a rather simple concept. That is what they do. None of the leftists here will talk straight with you. He's either confused in his own mind or wants you to be confused in YOUR mind.

In one sentence Rumble will say that Congress allows the Treasury to add dollars to the banking system in an amount equal to the spending bill. Then he says that most of the money [in circulation] is created by private banks making loans. If you read that at face value he's essentially saying that a private bank can fabricate a balance sheet. That's obviously not true. So what Rumble is doing is deceiving.

Then he does even more deception by injecting population growth, as if adding a person changes the money supply problem. Same thing with years. He compares 1950 with today, as if it is years that change the money supply and not the actual mechanism, which is Congress and the Federal Reserve.

This is his way of deflecting from the real incompetence -- Congress and the Federal Reserve.
 
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Monlion

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Jul 9, 2001
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In other words, we print money and people around the world give us stuff for it.

More accurately people around the world want to save US dollars. There are lots of reasons for that - it's a very stable currency, there is a lot stuff you purchase with it, treasuries are risk free way of saving dollars while earning interest, the treasury market is extremely liquid, etc., etc.

Americans are accustomed to this. We don't need to manufacture they say. We have enough. We can be a "service economy," i.e., cut each other's hair.

Hmmm haircuts did not make the list of top ten exports for 2021.

Export growth rebounds. U.S. exports of goods and services rose over 18.5% in 2021, largely making up for the pandemic-induced 15.6% decrease in 2020. Goods exports increased by 23.3%. International Trade Administration economists note the U.S. set export records with 57 trading partners, including big markets such as Mexico, China, South Korea, and Germany.​
The following export product groups categorize the highest dollar value in American global shipments during 2021. Also shown is the percentage share each export category represents in terms of overall exports from the United States.​
  1. Mineral fuels including oil: US$239.8 billion (13.7% of total exports)
  2. Machinery including computers: $209.3 billion (11.9%)
  3. Electrical machinery, equipment: $185.4 billion (10.6%)
  4. Vehicles: $122.2 billion (7%)
  5. Optical, technical, medical apparatus: $91.7 billion (5.2%)
  6. Aircraft, spacecraft: $89.1 billion (5.1%)
  7. Gems, precious metals: $82.3 billion (4.7%)
  8. Pharmaceuticals: $78 billion (4.4%)
  9. Plastics, plastic articles: $74.3 billion (4.2%)
  10. Organic chemicals: $42.9 billion (2.4%)
Eventually the world will realize that American citizens won't pay back their debt.

When have we not paid back our debt? We always pay our debt and interest that's why US Treasuries are considered risk free investments. It not possible for the US federal government to forced into default for debt denominated in US dollars.

That will increase interest rates, crash the dollar, and create hyperinflation in the USA. That has to be China's goal.

The Chinese want to kill the economy of their biggest customer? Where would they sell all the crap they make?

It's unbelievable, the ignorance.

I can agree with you on this 100%.
Maybe the Biden administration should encourage our production of mineral fuels instead of doing all it can to discourage it, seems like the world wants to buy them.
 

PSUEngineer89

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Aug 14, 2021
6,216
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Spending won't drop. Budgeted spending for this year is $5.8 trillion and Biden just added $4 trillion over 10 years which averages $400b. Politicians aren't going to cut entitlements and they can't cut interest on the debt.

WASHINGTON, May 25 (Reuters) - The U.S. budget deficit will shrink dramatically to $1.036 trillion for fiscal 2022 from $2.775 trillion last year as a strong recovery prompts a surge in revenues and lower outlays, but slowing growth will start to reverse the trend, the Congressional Budget Office said on Wednesday.​
Yes moron.

Compare his year to one of the Covid years and conclude things are getting better.

Yes, moron, do that.

Great analysis. Clown.
 

bdgan

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May 29, 2008
61,879
38,803
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The biggest problem is that half of that debt comes due in the next three years. Just as inflation and the Fed are raising rates already. And all that refinancing will,push rates higher yet. Then the annual paymencould approach manual tax revenue.
I agree with everything you said except the final number. 2023 interest expense will probably be $400b this year and quickly rise to $600b in the next 2 years and $1.2 trillion in 10 years. Tax revenues are $4.5 trillion.

But add entitlements to interest and that will consume all tax revenues. Every other program including defense will have to be financed with more debt. I think the fed will have to lower interest rates after they send us into recession. That could be followed by decades of lethargic growth for decades.
 

bdgan

Well-Known Member
May 29, 2008
61,879
38,803
1
Maybe the Biden administration should encourage our production of mineral fuels instead of doing all it can to discourage it, seems like the world wants to buy them.
Democrats only have three things to run on:
  1. Racism
  2. Evil rich vs poor
  3. The planet is being destroyed
They can't give up on any of those and expect to remain viable. So no, they can't promote anything that involves mining in the U.S.
 

PaoliLion

Well-Known Member
Nov 2, 2003
12,775
6,369
1
I am hearing from various analysts that the prime rate will need to get to the 4-5% range. This is what happens when you increase money by 40% without production to back that up. That much money should have been spread out over at least a decade.

How does the government finance this? It seems to me that interest payments will exceed the deficit itself. Does the government (Fed) just take all the liquidity out of the system and recreate 2008?

Otherwise, wouldn't the imbalance generate a financial collapse, i.e., hyperinflation?

I don't see how we stop a death spiral without cutting public spending when debt is this high.

Someone please explain an alternative mechanism to control inflation. We are in an unprecedented situation. The last time debt/GDP was anywhere even close to this we had marginal tax rates that are much higher than today, 70% for some.

How do you get to those tax rates without an economic implosion or "the rich" sending their capital overseas?

I see a lot of hope, speculation, and dreaming, but not any serious math or logic.

LOL - A republican wakes up one fine day and realizes that COVID was real and continues to fvck the world and the massive government debt that they’ve been driving up for the last 4 decades is a big problem.

Now, how do you solve the problem faster?

First, you need to raise taxes and, at minimum, balance the budget, and, better yet, start to pay down debt. This is exactly why I was so critical of Trump because when the economy was good, he was spending like a madman and handing out debt driving tax cuts. The PPC loans are another fine example of very very bad decision making in the last administration that drove up debt.. He’s the bankruptcy king of America. Unfortunately, he was yet another asshole Republican in a very long line (4 decades worth) of them that fvcked our country long-term so that they could buy a few votes with a tax cut. We need to balance revenue and spending.

Solution: Vote democrat.

Second, we need to diversify out supply chain so that China can’t intentionally or unintentionally fvck with us. China has been a huge contributor to inflation because they stopped factory production and became a single point of failure (creating supply chain shortages and jacking up costs). The US is far more dependent on China than the other big economies (and its getting worse) and you see how their supply chain disruption has impacted our consumer costs. We need to increase trade with Mexico, other parts of LATAM, other parts of APAC (India, Vietnam). Obama had it right with TPP and we should be out signing free trade deals with everyone but China as fast as we possible can. We also need to invest in securing sources of inexpensive raw materials. The government needs to step in and think about all of the major raw materials that are going to be critical for our economy and manufacturing in the US. I’d like to see trillions spent over the next decade on strategic bets that will secure our future. The semi-conductor bill was a small step in the right direction, but they need to do way better than that.

Solution: Vote democrat.

Third, we need to become truly energy independent as a country. Fossil fuels are controlled by our biggest enemies and the US energy companies are big time profiteers. In short, US oil interests are more closely aligned with Russia and Iran than the American consumer. We need to fvck up Russia, win the war in Ukraine, diversify away from fossil fuels, and nationalize parts of the US fossil fuel supply chain so that the US government can better control supply when it needs to.

Solution: Vote democrat.
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
5,647
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Rumble is real good at taking an issue off on a tangent and confusing a rather simple concept. That is what they do. None of the leftists here will talk straight with you. He's either confused in his own mind or wants you to be confused in YOUR mind.

In one sentence Rumble will say that Congress allows the Treasury to add dollars to the banking system in an amount equal to the spending bill. Then he says that most of the money [in circulation] is created by private banks making loans. If you read that at face value he's essentially saying that a private bank can fabricate a balance sheet. That's obviously not true. So what Rumble is doing is deceiving.

Then he does even more deception by injecting population growth, as if adding a person changes the money supply problem. Same thing with years. He compares 1950 with today, as if it is years that change the money supply and not the actual mechanism, which is Congress and the Federal Reserve.

This is his way of deflecting from the real incompetence -- Congress and the Federal Reserve.

In one sentence Rumble will say that Congress allows the Treasury to add dollars to the banking system in an amount equal to the spending bill.

Yes, that is true. That is how all federal government spending occurs. Federal taxes work the opposite direction. All federal taxes simply remove dollars from the banking system.

Then he says that most of the money [in circulation] is created by private banks making loans. If you read that at face value he's essentially saying that a private bank can fabricate a balance sheet.

This is how our monetary system works. The books are not cooked. When a bank creates a loan they create a liability and an asset account on their balance sheet which match. The difference between a bank creating money and me or you doing it is that those loan assets are in dollars. So yeah, they are in fact creating dollars that are offset by liability accounts. They can't do this willy nilly of course, banks are one most highly regulated industries in country and for good reason.

The difference between bank created dollars and federal government deficit created dollars is in the liability part. If you add up all the bank created dollars and all the offsetting bank liability accounts they net to zero. The federal government deficit created dollars on the other hand belong to us without any offsetting liability. All of the net dollars that exist in the banking system are result of the cumulative amounts of federal government deficits. Those dollars belong to us the public free and clear.

Then he does even more deception by injecting population growth, as if adding a person changes the money supply problem. Same thing with years. He compares 1950 with today, as if it is years that change the money supply and not the actual mechanism, which is Congress and the Federal Reserve.

The money supply is not that static. It's a dynamic supply that changes with how economy is doing via bank lending activity.

The 1950 comparison was about the demand side not the supply. The economy of 2022 could not operate with the amount of dollars that were in the banking system in 1950.
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
5,647
1
Maybe the Biden administration should encourage our production of mineral fuels instead of doing all it can to discourage it, seems like the world wants to buy them.

I agree. I imagine doing so would look something like this:

Mining companies operating in the U.S. are poised to get a potential windfall from the Democrats’ landmark climate, health care and tax legislation that passed Friday.​
Environmentalists heralded the package for its large tax breaks for wind, solar and battery developers. But tucked inside the bill’s roughly 700 pages is a new incentive for an industry that greens often oppose.​
An advanced manufacturing tax credit included an added bonus: Mining companies will be able to write off 10 percent of the cost of their operations if they produce any amount of “critical minerals” — a term used by government agencies to describe minerals considered essential to national security and the economy that are vulnerable to foreign supply disruptions.​
The tax break is far from the only benefit for miners found within the climate bill.​
Democrats also included $500 million in Defense Production Act funding. The money will help the Biden administration use a Korean War-era law to subsidize U.S. projects that process minerals found in electric vehicle batteries (Greenwire, April 4).​
All this assistance may help mining companies meet the mineral demands of the climate bill, an issue made more pressing by Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.).​
Manchin made clear he wanted a supply chain requirement added to its expanded version of the electric vehicle tax credit. The bill now mandates automakers make EVs with minerals mined or processed domestically or within U.S. free trade agreement nations.​
On its own, this domestic minerals requirement is expected to juice the auto industry’s demand for more mining at home, while potentially hurting EV growth in the short-term as carmakers race to build new manufacturing pathways (E&E Daily, Aug. 8).​
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
5,647
1
Yes moron.

Compare his year to one of the Covid years and conclude things are getting better.

Yes, moron, do that.

Great analysis. Clown.

I get called 3 derogatory names in one post.

I must be on the right track!

Covid or not cutting the deficit by that much in one year is deflationary.
 

PSUEngineer89

Well-Known Member
Aug 14, 2021
6,216
10,554
1
I get called 3 derogatory names in one post.

I must be on the right track!

Covid or not cutting the deficit by that much in one year is deflationary.
But isn't it dishonest and/or misleading?

Isn't the truth that we are set to run trillion dollar deficits for as far as the eye can see?

Our first deficit of $1T in 2010? Now it looks to never end.

How about a little integrity - stop misleading.
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,133
5,647
1
But isn't it dishonest and/or misleading?

Isn't the truth that we are set to run trillion dollar deficits for as far as the eye can see?

Our first deficit of $1T in 2010? Now it looks to never end.

How about a little integrity - stop misleading.

But isn't it dishonest and/or misleading?

It's a fact.

Isn't the truth that we are set to run trillion dollar deficits for as far as the eye can see?

If that what is needed to achieve full employment and price stability then so be it.
 

PSUEngineer89

Well-Known Member
Aug 14, 2021
6,216
10,554
1
But isn't it dishonest and/or misleading?

It's a fact.

Isn't the truth that we are set to run trillion dollar deficits for as far as the eye can see?

If that what is needed to achieve full employment and price stability then so be it.
As I said, dishonest and misleading.
 

Monlion

Well-Known Member
Jul 9, 2001
1,335
1,582
1
I agree. I imagine doing so would look something like this:

Mining companies operating in the U.S. are poised to get a potential windfall from the Democrats’ landmark climate, health care and tax legislation that passed Friday.​
Environmentalists heralded the package for its large tax breaks for wind, solar and battery developers. But tucked inside the bill’s roughly 700 pages is a new incentive for an industry that greens often oppose.​
An advanced manufacturing tax credit included an added bonus: Mining companies will be able to write off 10 percent of the cost of their operations if they produce any amount of “critical minerals” — a term used by government agencies to describe minerals considered essential to national security and the economy that are vulnerable to foreign supply disruptions.​
The tax break is far from the only benefit for miners found within the climate bill.​
Democrats also included $500 million in Defense Production Act funding. The money will help the Biden administration use a Korean War-era law to subsidize U.S. projects that process minerals found in electric vehicle batteries (Greenwire, April 4).​
All this assistance may help mining companies meet the mineral demands of the climate bill, an issue made more pressing by Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.).​
Manchin made clear he wanted a supply chain requirement added to its expanded version of the electric vehicle tax credit. The bill now mandates automakers make EVs with minerals mined or processed domestically or within U.S. free trade agreement nations.​
On its own, this domestic minerals requirement is expected to juice the auto industry’s demand for more mining at home, while potentially hurting EV growth in the short-term as carmakers race to build new manufacturing pathways (E&E Daily, Aug. 8).​
Mineral Fuels according to your list in your post (reproduced below) are our largest export category and include oil, coal and natural gas. Also included in your top ten list are products from the US petrochemical industry produced from mineral fuels including plastics and organic chemicals. In addition, the competitiveness of the companies that produce the other products on your list are greatly aided by the cheap, plentiful energy provided by the US mineral fuels industry.

The minerals you are referring to are those minerals related to the renewable energy industry. I agreed that since we are heading down the EV and renewable path we better have our supply chains in order but I am sure if the Democrats have proposed it there is a lot of unnecessary, wasteful spending in the bill.

EXPORTS FROM THE UNITED STATES
  1. Mineral fuels including oil: US$239.8 billion (13.7% of total exports)
  2. Machinery including computers: $209.3 billion (11.9%)
  3. Electrical machinery, equipment: $185.4 billion (10.6%)
  4. Vehicles: $122.2 billion (7%)
  5. Optical, technical, medical apparatus: $91.7 billion (5.2%)
  6. Aircraft, spacecraft: $89.1 billion (5.1%)
  7. Gems, precious metals: $82.3 billion (4.7%)
  8. Pharmaceuticals: $78 billion (4.4%)
  9. Plastics, plastic articles: $74.3 billion (4.2%)
  10. Organic chemicals: $42.9 billion (2.4%)
 
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